The hemp industry has come a long way; the possibility of hemp insurance in 2020 is one of the greatest achievements.
Insurance is a necessity, if not a right, for the hemp industry. There are many risks associated with hemp farming. One notable one is the risk of exceeding the tetrahydrocannabinol (THC) limit that hemp farmers have to adhere to. Should hemp exceed 0.3% THC it will be declared illegal and destroyed resulting in massive losses. Fluctuations in climate may also cause tremendous losses to the hemp farmer.
Hemp is a highly regulated agricultural commodity and when farmers fail to meet the set industry standards they run the risk of incurring huge losses. This makes hemp insurance an essential requirement in this industry. But it may come as a surprise to know that insurance is scarce in this industry, we are just beginning to scratch the surface.
Why is hemp insurance scarce?
The Agricultural Act of 2018 legalized hemp at a federal level. Prior to this, hemp was illegal and thus it was difficult, if not impossible to find insurance for hemp. Even after legalization insurance has remained scarce as the industry is still highly regulated and consequently high-risk for insurance. But with the US department of Agriculture (USDA) making effort to streamline the industry there has been significant progress in the last couple of months. If this trend goes on the hemp industry may soon be fully insured.
Hemp Interim Final Rule and What it means for Hemp Insurance
The interim final rule was established on October 31st, 2019 and sets out the rules and regulations on hemp production in the US. This rule was mandated by the Agricultural Act of 2018 and outlines the duty of the US Department of Agriculture (USDA) in approving hemp production plans from the States and Indian Tribes. The USDA is also allowed to institute a federal plan for the domestic production of hemp in States and Tribes that do not have their own plans. The interim plan is effective until November 1, 2021.
The interim rule provides a framework through which hemp insurance can be made accessible to hemp farmers at a federal level.
Can you Insure Hemp in the US?
As from 2020, hemp businesses will be able to access insurance services from the government through agencies of the USDA. This includes the Farm Service Agency (FSA) and Risk Management Agency (RMA).
As from the hemp crop year 2020, RMA will provide insurance services to the hemp industry through the Whole-Farm Revenue Protection and Multi-Peril Crop Insurance coverage.
The FSA will also provide hemp insurance through the Noninsured Crop Disaster Assistance Program.
This insurance from the federal government will go a long way in providing stability in the industry. It will enable farmers to survive the turbulence that comes with this nascent industry.
Let us take a look at the insurance programs that are available to hemp farmers through USDA agencies.
Whole-Farm Revenue Protection (WFRP)
The Whole-Farm Revenue Protection (WFRP) program will be available to hemp farmers in the US in the hemp crop season of 2020. This insurance protects hemp farmers from huge losses that may arise from major disasters and complete crop loss. It covers all the hemp-related commodities on the farm and is tailor-made to suit large-scale growing operations. It covers up to $8.5 million in insured revenue.
Hemp farmers who are involved in the cultivation of hemp flowers, seeds, and fibers can apply for WFRP insurance. The farmers must be in compliance with state laws regulating the cultivation of hemp. This includes ensuring that the THC limit of 0.3% is not exceeded. Hemp with high THC is not insurable. Under this program, hemp does not qualify for replanting payment.
However, the WFRP may not be viable for small-scale grow operations. This program is tailor-made to cushion against massive losses based on yearly financial statements.
Multi-Peril Crop Insurance Pilot Insurance Program (MPCI)
This is another insurance that is available for hemp farmers in the hemp growing season of 2020. The MPCI is to be piloted in select counties of 21 states.
To be eligible for this insurance, hemp farmers need to have cultivated hemp for at least one year prior. They also need to have a sale contract in place. Small-scale farmers are excluded as the minimum acreage for CBD is 5 acres while it is 20 acres for grain and fiber. Under this program, hemp farmers are not eligible for replant payments.
As from 2021, hemp farmers will be eligible for the Nursery Value Select pilot crop insurance program. In this program, hemp will be grown in containers and will need to comply with federal regulations to be eligible for the insurance.
Noninsured Crop Disaster Assistance Program (NAP)
NAP was designed to cater to hemp that is not covered under any other federal insurance program. It covers hemp that is grown for fiber, grains, or CBD and takes effect from the crop season of 2020.
NAP charges a service fee of up to $325 per crop or $825 per producer per county. This, however, should not exceed $1,950 for a single producer.
To be eligible hemp farmers must have a valid hemp growing license and must comply with all other regulatory requirements at a federal and state level. Alternatively, hemp growers can work under state research programs that were authorized under the 2014 Agricultural Act.
Private insurance for hemp businesses
Apart from the USDA agency programs, hemp farmers can access insurance services from private insurance agencies. Private agencies are likely to charge a premium, however, they are necessary as this may cushion a hemp farmer from tremendous losses in the future.
There are a number of such agencies that cater to the insurance needs of hemp businesses. Here are three to consider:
1. National Hemp Insurance Agency (NHIA)
The National hemp insurance agency is present across all states that have legalized hemp. They work through insurance agents who are distributed in different states. The NHIA offers tailor-made insurance solutions and consultancy to all types of businesses in the hemp industry.
2. Veracity Insurance for Hemp Businesses
Veracity Insurance caters to hemp businesses in different parts of the US. They offer crop insurance, liability insurance, and hemp property insurance.
This insurance agency is dedicated to the hemp and cannabis industry. They prioritize affordability which is a thorny issue in this space. The company was started in 2010 and is currently one of the leading privately-run insurance agencies in this niche.
Do you need insurance to sell hemp?
Hemp insurance for hemp businesses is not a requirement, but it is advisable. Hemp has numerous inherent risks. Hemp growers risk crop failure as hemp retailers have their fair share of risks as well. With an insurance policy in place, hemp businesses can be shielded from massive losses.
Does Insurance Cover Hemp CBD Oil?
CBD oil is covered by privately run hemp insurance agencies such as the ones listed above. CBD oil is consumed by patients with different ailments creating a risk for hemp businesses should anything go wrong.
Why do hemp businesses need insurance?
The laws in this industry keep changing making it difficult for hemp businesses to keep up with the legal requirements in the niche. This creates great risks for hemp businesses. A hemp insurance policy protects hemp businesses from losses in the event that there is a legal suit against the business.
Hemp cultivation is greatly affected by climatic changes. Should the climate not be conducive for hemp cultivation and the crop fails, an insurance policy can save the day.
Can Marijuana Dispensaries Get Insurance?
Marijuana dispensaries can get insurance from privately-run insurance agencies. To be eligible, they need to be operating in a state where marijuana is legal and comply with the regulations that have been set at both a federal and state level.
Hemp insurance in 2020 is promising; it is highly likely that more investors will troop in now that insurance is becoming increasingly available.